Clara-Pensions, the U.K. consolidator of defined benefit pension funds, announced its first superfund transaction Nov. 6 with the Sears Retail Pension Scheme.
The Sears pension fund's 9,600 participants will be the first to enter a U.K. pension superfund as the first step toward an insured buyout. Clara-Pensions also pledged an additional £30 million ($37 million) of ring-fenced funding to support the pension fund, which has £590 million in assets.
On Nov. 30, 2021, Clara-Pensions became the first superfund approved by The Pensions Regulator, allowing it to accept pension funds seeking to consolidate. Its model is considered a "bridge to buyout" because it gives pension funds a more cost-effective buyout method when interest rates, plan demographics and other factors make the timing right to purchase annuities. Clara-Pensions can also buy in or buy out tranches of one or more sections of plans if it chooses.
At the time, it projected that it could consolidate £5 billion ($6.6 billion) in defined benefit pension liabilities by the end of 2025.
The Pensions Regulator approved the Sears transfer, which will formally begin at the end of November, Clara-Pensions said in the release, and a full buyout could happen in five to 10 years. Trustees for the Sears Retail Pension Scheme said in the release that they are "confident that the proposed transfer is firmly in our members' best interests."
Consultants Hymans Robertson and LCP served as actuary and investment adviser respectively for Clara Pensions, along with fiduciary manager Van Lanschot Kempen and legal firms CMS, Eversheds Sutherland and Travers Smith.
WTW served as lead pension risk transfer adviser and scheme actuary to the Sears Retail Pension Scheme, while Barnett Waddingham was investment adviser. Isio will remain the pension fund's administrator.
The transaction "is a significant milestone for the pensions industry" because it removes the hesitancy on the part of trustees and sponsors around executability, said Adolfo Aponte, managing director of Cardano Advisory, in a separate statement.
The additional option of capital-backed journey plan solutions with additional security while fund assets are managed to an agreed target return or funding level "do offer vital de-risking options for schemes, but they are still relatively new to the market," he said.
Clara is backed by Sixth Street, a diversified global investment firm with $74 billion in assets.
